whta's the verdict of debt settlement . those companies seem shady.

[stopthebleeding]

I talked witha few . I feel like they are a scam. I was told by one to be cafeful because they change states and takes people money and change buisness names they want anywhere from 9-14% and they get there money up front.Do they even do what they say. anybosy with a positive outcome.

[CATCHMEIFYOUCAN]

STAY AWAY FROM THOSE DMP'S.

MY EXPERIENCE: Especially the ones that are not approved my the courts. I applied to one simply because a friend suggested it. They wanted $3500 upfront as admin fees, etc. (just about as much as it cost me to get a lawyer and file BK). Than they wanted me to put $1000 a month away in a separate bank account, so when the account was a bit "up there," then they use the money to negotiate with the creditor(s) and of course take an additional percentage for themselves. Well I blew $500 first off. And as I was reading into the DMP's and reading into BK. It made more sense to file bankruptcy. The DMP tried to persuade me that BK was no good, that I wouldn't make it!
Thank goodness I got out! I lost the $500 but nothing compared to what I would have lost had I stuck with them!
With BK you have to go to an approved CCCS (Credit Card Counseling Service) sort of like a DMP. Most of the time you are not able to meet payment plans with the CCCS so they send you a certificate and suggest how you can repay your debts (BK of course). The certificate is the first step on your way to filing BK.
The only thing that came out of the DMP (Debt Managment Program) was they were preparing me for BK (little did they know!). They told me to close my bank accounts or STOP using them if I had any loans/credit cards tied to them as the Creditor would and can take any monies (using the "cross collateral card") and automatically apply to whatever debt (credit card/loan) I owed on. They said I should open a separate bank account. Thank goodness I did that because I don't think it would have been easy to get a new bank account while in BK. There is no guarantee with the DMP's as far as "automatic stay," protection like Bankruptcy offers you. I was still in jeopardy of possible law suits, garnishements, etc from creditors, whereas BK protects from all that!

Best Wishes, Catchmeifyoucan

[jal1129]

I agree with everything CMIYC said! Stay away. I talked to 3-4 different DMP's before deciding on bk. I did a lot of research and could never find anyone who had stayed with the plan to the end and/or was happy with the outcome of the DMP.

They will say anything to keep you away from bk because they want your money. They lied to me, one told me flat out under the new law we could'nt even file bk (a lie we have filed no-asset chapter 7) Another told me under the new law if a family of 4 makes more than minimum wage we have to pay back 100% over 5 years, again a lie.

The creditors that are the last to get settled are'nt going to be happy you are settling with others first and will sue you. You will still get the phone calls,
the IRS will want taxes paid on the forgiven debt, and your credit is still ruined, its just not a good way to go. Besides you can settle the cards yourself if thats what you want to do and save the $3500.

[BKTango]

I was in one for a year, and regret every moment of it. I spent over $3000 just to a DMP for a fee and only was able to settle two very small accounts for $1200. You will not be under the bk protection, you will still get harassed no matter what the DMP tells you and you will eventually get sued. It's a given. The outcome is far worse than bk in my opinion, after having gone through both. We should have spent that money on necessaties and just filed to begin with. We were also told that we could not file do to the new laws. It really is a shady business however, should you decide that is the best route for you, use a non-profit court approved service such as CCCS or something similiar. However be prepared, not all creditors work with them and the payment per month is usually far more than one can afford.

[SinkingFast]

A DMP might work for you if,........... All of your Creditors will participate. And you can afford to make the payment.

In our case, all of our Creditors would participate, but,......... The DMP payment that was figured for us was the same as our minimums every month. Only difference was, with the DMP we woulda been out of debt in 5 years. We couldn't pay the monthly payment so a DMP was not gonna help us.

If you decide to learn about it or give it a whirl, use a not-for-profit as suggested before. Also there's a list of DOJ approved Credit Counseling Agencies. Maybe you can check with some of them to see what they have to offer.

http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

At least that way, you know you're working with a DOJ approved agency.

[HHM]

First, understand the difference between "Debt Settlement" and Debt Management (or Credit Counseling).

Debt Settlement companies attempt to negotiate your debt to some reduced amount and then have you pay off the debt in a lump sum, or sometimes over very limited amount of time (i.e. 6 months or less). The main draw back to these programs are the tax implications...but, for a certain, small group, of individuals, this may be their only option.

Debt Management (Credit Counseling) puts you on a monthly payment plan...you make one payment to the Credit Counseling firm, and they pay your Unsecured Creditors. CCC firms, will typically get interest reduced on your payments etc, and yes, they do take a fee up front from each payment, the more reputable ones only take 2-5%. But they also get back-end fees from the credit card companies. NOTE, the big problem with CCC is that you may have creditors that will not work with the CCC you choose.

They are not inherently scams, but there are some shady companies...and since they don't have a requirement to look out for your best interests (i.e. like lawyers do), there only job is to get you to sign up for the program regardless of whether the program is right for you.

I am not going to get into all the pros, cons and risks of each...but the MAIN problem is that by the time a consumer gets to point of contacting these types of agencies, they are generally too far financially gone for the programs to work, so consumers get into the programs, but all they are really doing is delaying the inevitable and throwing good money after bad.

And a note about DOJ approval....the ONLY thing that the DOJ is approving those companies for is their pre-and-post BK classes, the DOJ does NOT investigate the actual programs those companies offer, so you will still want to check the FTC websites for complaints.

[jal1129]

For the record, my previous post was regarding debt settlement companies. I also did contact a couple of DMP's and thier payments were way too high. The best one was only about $30 less then the minimums I was already paying.